Beyond bubble: Google loses its mind

The tech bubble is so yesterday. We’ve now entered a dizzying new world whose end may be more Hindenburg than pricked birthday balloon.

Just take a look at this story from TechCrunch, about how Path turned down a $100 million buyout offer from Google GOOG. Don’t know what Path is? Don’t worry, neither do most people. TC reports that the company — which makes an app for sharing photos and short video clips with a circle of 50 close friends — only has “hundreds of thousands” of users. In other words, it’s getting its butt kicked by rival Instagram, which today announced 1.75 million users.

To be clear, my argument is not that Path is a bad company. Or that it can’t eventually become the market leader in a niche space with virtually no barriers to entry. Or that it can’t use photo-sharing as a jump-off point for a major social graph monetization play (assuming that such things do, eventually, materialize).

No, my argument is that today’s Path is not worth $100 million. That’s just the facts. And please don’t lecture me about how you’re worth what the market says you’re worth. The “market” didn’t say Path was worth $100 million. Google did. And Google apparently views $100 million like I view a quarter: Worth picking up, but also worthy of being dumped in the coffee shop tip cup.

The argument seems to be that Google liked Path’s product, and also liked the idea of “buying” CEO Dave Morin (he’s ex-Facebook, and theoretically could persuade more of Zuck’s gang to switch sides). That’s lovely, but I’m pretty sure you could simply pull some Facebookers by agreeing to pay each of them a million dollar signing bonus. I know engineering salaries are sky-high right now in Silicon Valley, but not that high…

Of course, Google isn’t the only culprit here (or perhaps victim is the better word). Remember, Path turned down the offer. Instead, it raised $8.5 million in venture capital from Kleiner Perkins and Index Ventures at a pre-money valuation of around $25 million (also a big number, but a bit more defensible). Snubbing Google apparently was a contentious decision — gee, you think — but the optimists won out over the realists.

Not sure which is worse: Proliferate buyers or swollen-headed startups? Oh, I know: When both exist at the same time.